TaxTMI 
TaxTMI 
1999 (7) TMI 93
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....n were the equal 50% partners of the firm of M/s. Skyjet since its inception in 1978. Both of them were working partners and carried on this business of Travel Agency. In April, 1979 the assessee-company was floated by Miss. Preeti V. Mehta and Mr. C.S. Amin and both of them were signatories to the Memorandum of Association and Articles of Association of the company. The business of the firm was taken over by the company and both of them were the promoters and the first Directors of the company as it is evident from the Memorandum of Association and Articles of Association. Miss Preeti V. Mehta was the first Chairman of the company and the Board of Directors conducted the business of the company since its inception as Chairman for a considerable time. Miss Preeti V. Mehta and Mr. C.S. Amin were authorised by the board to operate the bank accounts of the company vide resolution dated 24-4-1979. Everything went on well till search was carried out at the business premises of the assessee-company. During the course of search statements of Miss Preeti V. Mehta and Mr. C.S. Amin were recorded. In the books of the company loan accounts of both Miss Preeti V. Mehta and C.S. Amin stood reco....
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....Mr. C.S. Amin as regards their accounts in the books of the assessee-company and her concurrence to having signed the said statements and other vouchers and transactions of the company and their statements conclusively proved that the money had been borrowed in their/her name under their knowledge and with their full acquisitions, as being the Directors of the company, and credited in the books of account of the company as loans from them. The learned CIT(A) after going through the written submissions and the evidence on record held the borrowings in the names of Miss Preeti V. Mehta and Mr. C.S. Amin as quite genuine and accepted the same as loans borrowed by them. In so doing in her order at page 5 and onwards she gave detailed narration of the modality and conduct of Miss Preeti V. Mehta and Mr. C.S. Amin and their association with the assessee-company their concurrence for the money having been borrowed in their names and with their knowledge by way of various depositions, their actual participation in the conduct of the management of the affairs of the company, Miss Preeti V. Mehta herself being the founder Chairman of the company her actual operations of all the bank accounts....
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....resh evidence was furnished before the learned CIT(A) as contended in the grounds of appeal by the Revenue because the affidavit of Smt. Parulben M. Jayakrishna was filed before the learned ITO and the ITO did not bring any evidence on record to rebut the contents of the affidavit. The learned counsel further submits that both Miss Preeti V. Mehta and Shri C.S. Amin being Executive Directors of the company were deeply involved in the affairs of he company and in this regard he drew our attention to the various documents/vouchers statements etc. signed by them. He further drew our attention to the certified copies of accounts of Kiran K. Chokshi and Shri Bhaveshkumar Shroff who had confirmed having advanced the loans to Preeti V. Mehta and Shri C.S. Amin at the instance of Parulben M. Jayakrishna. The learned counsel for the assessee submitted that the source of deposits having been proved beyond any shadow of doubt, there is no justification for treating the two deposits as assessee's income from undisclosed sources. 8. We have considered the rival submissions and perused the facts on record. At the outset we must state that while deciding the appeal, the CIT(A) did not entertai....
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....ng wife of well known industrialist. In the face of above, mere negation by two creditors during the course of search proceedings perhaps to save their own skin, should not lead to the conclusion that the credits are not genuine. Under these circumstances we uphold the finding of the CIT(A) and dismiss this ground. 9. Ground No. 2 reads as under: "The learned CIT(A) has also erred in law and on facts in deleting Rs. 60,000 included by the ITO as income from undisclosed sources, by admitting fresh evidence in violation of rule 46A." During the course of assessment proceedings the ITO noted a deposit of Rs. 60,000 in the name of "Paldi Jain Sangh". He called upon the assessee to furnish confirmation from the said party. Since no confirmation was filed before the ITO he treated the same as assessee's income from undisclosed sources: On appeal, the learned CIT(A) deleted the addition observing as under:- "The assessee-company at this stage has endeavoured to get the confirmation of as many as 60/70% of the persons travelling in group in the name of Paldi Jain Sangh. It has been shown that tickets are issued against this money and therefore question of treating this as undis....
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....y minor children do get pin money and gifts etc. On auspicious occasions and looking to the smallness of the amounts and the status of the assessee the CIT(A) has rightly deleted the addition of Rs. 16,000. Her finding is accordingly confirmed. 14. Now we take up the assessee's appeal (ITA No. 1032/Ahd./1987): 15. The first ground raised by the assessee is that the CIT(A) has erred in confirming the addition of Rs. 1,05,263 made by way of adoption of net profit on gross profits. As stated above, the assessee-company carries on business of acting IATA approval Travel Agents. The ITO while framing assessment order arrived at a conclusion that the operating results disclosed by the assessee-company were not acceptable on the ground that the expenses were unreasonably high. In this connection he referred to the salary payments to different employees, telephone and telegrams expenses of Rs. 85,468. He compared the case of the assessee with that of M/s. Goodwind Travels who had shown better results. He, therefore, estimated the assessee's net profit at the rate of 20% of its receipt of Rs. 5,26,370 which worked out to Rs. 1,05,263 and added the same to the income of the assessee. ....
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.... document was found connected with operating results. The learned ITO has not brought any material on record to prove that the expenses claimed under the head "Salaries", "Telephone, telex and travelling expenses" were not incurred or were bogus. In the absence of any defects having been noticed in the books of account, regularly maintained during the course of business, we hold that the addition made is uncalled for. We accordingly delete the impugned addition. This ground accordingly succeeds. 19. The next grievance of the assessee is with regard to the two cash credits of Rs. 60,000 and Rs. 40,000 in the name of Miss Preeti V. Mehta. Before the CIT(A) evidence was produced for the first time and she held that the ITO had right to look into this evidence to ascertain its veracity and reliability of the deposits and accordingly she restored the matter back to the ITO. We do not find any infirmity in the directions of the CIT(A) and accordingly uphold the same. This ground accordingly fails and is dismissed. 20. In the result the revenue's appeal is dismissed and the assessee's appeal is allowed in part. Per Shri Phool Singh, Judicial Member-I have the privilege of going t....
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..... Amin allegedly have started business of Travel Agency in the name of Skyjet Aviation (P.) Ltd since 1978 being partners of equal shares. In April, 1979 the assessee-company was floated by Miss Preeti and C.S. Amin and the business of the firm was taken by the company. There was a search and seizure operation under section 132 of the IT Act in the case of assessee during 22-3-1985 to 29-3-1985 in which books of account pertaining to the assessment years 1982-83 to 1985-86 were seized. During the seizure operation statements of several employees and executives of the assessee were recorded including that of Miss Preeti, C.S. Amin, Hasmukh Dinmanikant, Shailesh R. Bhatt and Anil S. Gandhi. During assessment proceedings for the year under consideration, the ITO observed from the books of account of the company that there existed to an account in the name of Miss Preeti showing a deposit of Rs. 8,81,620 made in cash on various dates. In the same way the books of account of the company had another loan account in the name of C.S. Amin containing different deposits on different dates in the year under consideration totalling Rs. 2,83,494. However, the Assessing Officer that during the s....
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....of the company were procured by Smt. Parulben M. Jayakrishan for the benefit of the company from Kiran S. Chokshi is neither believable nor probable in the circumstances of the company as also Mr. Kiran S. Chokshi was not in position to lend so huge amount to these persons and the theory that said Kiran S. Chokshi also borrowed from one J. Bhaveshkumar Shroff HUF was also not proved on record. In other words, as argued by learned D.R. the sources of the cash credits were not proved to the hilt while onus was on the assessee-company. The learned D.R. further pointed out that first appellate authority was not justified to place reliance on the documents of the assessee-company on which the statement of Miss Preeti was quite specific that she had signed all documents as she was working under the thumb of Smt. Parulben M. Jayakrishan. Contrary to it the contention of the learned counsel for assessee is that Miss Preeti and C.S. Amin have been the partners of M/s. Skyjet since its inception in 1978 and they carried on the business of Travel Agency having 50% share in the said firm. In April, 1979 the assessee-company was floated by Miss Preeti and C.S. Amin by taking over the firm busin....
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....onfirmed by both of them. In the same way copy of balance sheet of the company and copy of proforma receipt and payment a/c. of Miss Preeti for the money borrowed from Mr. Kiran S. Chokshi were also gone through by her. Even Miss Preeti and C.S. Amin in their statements have admitted authenticity of these documents. According to the learned counsel these two directors got terrified of the search and seizure operations which forced them to resale from their own admissions. 6. The next plea of the learned counsel for the assessee was that Kiran S. Chokshi has admitted lending of the amount standing in the names of Preeti and C.S. Amin. Copy of Statement of income of Kiran S. Chokshi for assessment year 1983-84 was also referred to along with copy of its assessment order and revised statement of total income of Kiran S. Chokshi for assessment year 1983-84 which are on pp. A-178 to A-181 of the paper look. These documents show that Kiran S. Chokshi has shown the said lendings of the amount in his statement of income and also shown the interests received thereupon. He further pointed out that not only the assessee-company has further shown that Kiran S. Chokshi had borrowed that amou....
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....ployees were able to start such a business at their own. Once they are taken as the employees of the assessee-company and sister concern the onus comes to the assessee-company to explain satisfactorily the nature and sources of those cash credits appearing in the names of the employees. In this connection, reference to the observations of their Lordships in the case of Sarogi Credit Corpn. even relied by the learned counsel for assessee are quoted as under:- "Held, that if the credit entry in the books of the assessee stands in the name of the assessee or assessee's wife and children, or in the name of any other close relation or an employee of the assessee, the burden lies on the assessee to explain satisfactorily the nature and source of the entry. But if the entry does not stand in the name of any such person having a close relation or connection with the assessee, but in the name of an independent party, the burden will still lie on him to establish the identity of that party and to satisfy the ITO that the entry is real and not fictitious. Once the identity of the third party is established before the ITO and other such evidence are prima facie placed before him pointing....
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....se of Shankar Industries v. CIT [1978] 114 ITR 689 (Cal.) in which their Lordships of Hon'ble Calcutta High Court after discussing the case of Orient Trading Co. Ltd. v. CIT [1963] 49 ITR 723 and that of Sarogi Credit Corpn. laid down that it is necessary for the assessee to prove the identity of creditors, capacity of creditor to advance money and genuineness of transaction. Mere proof of identity of creditor is not sufficient. This has been followed by the same High Court in subsequent cases Prakash Textile Agency v. CIT [1980] 121 ITR 890, C. Kant & Co. v. CIT [1980] 126 ITR 63 and Oriental Wire Industries (P.) Ltd. v. CIT [1981] 131 ITR 688. 10. Now on the basis of above legal preposition I have again to examine the genuineness of the transactions of loans allegedly given by Kiran S. Chokshi to Miss Preeti and C.S. Amin as has come in the explanation and for that we have to see whether he was capable to land such huge amounts to these two persons and whether the transactions are genuine or not. At the very outset it may be pointed out that Miss Preeti and C.S. Amin have denied to have borrowed any amount from Kiran S. Chokshi or even entering into any loan transaction with h....
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.... facts and circumstances also. 11. A perusal of statement of income for assessment year 1983-84 filed by Kiran S. Chokshi shall show that he has not shown the interest income for assessment year 1983-84 but simply has shown his income at Rs. 16,810 and filed revised income showing the interest income received from Miss Preeti and C.S. Amin to the extent of Rs. 23,811 under voluntary disclosure scheme and this income from interest shows that he had been charging interests @ 7% from Miss Preeti and C.S. Amin. Contrary to it this Kiran S. Chowkshi had paid interest to J. Bhaveshkumar and Mukundrai Amrutlal Shroff HUF @ 12%. This clears the whole of the picture. The truth comes out indicating that theory of Kiran S. Chowkshi is not believable at all because a man getting funds from one person @ 12% interest will not be lending that amount at lesser rate of interests and that of 7% even to his close friends howsoever close friendship may be existing between such person and his debtors. When assessee and Kiran S. Chokshi were caught in this situation they tried to wriggle out by making another bid by way of an award of common friend regarding payment of interests and this award is app....
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....ases where assessee had asserted to have obtained loan from a particular individual but in the case in hand it was admitted case that cash credits are appearing in the names of employees of the assessee-company and assessee-company was under obligation to discharge the onus by explaining satisfactorily the nature and sources of the entry. In this case the main source to be explained by the assessee was that of J. Bhaveshkumar and Mukundrai Amrutlal Shroff HUF as admittedly the cash credits were in the name of Preeti and C.S. Amin but undisputedly they were not owners of those cash credits and the theory that they borrowed from Kiran S. Chokshi. Even if it is taken as true it did not help the assessee as Kiran S. Chokshi is not owner of that amount of cash credit but he allegedly borrowed from above referred to two persons and thus the evidence which should have come from the side of the assessee was that of J. Bhaveshkumar and Mukundrai Amrutlal Shroff HUF. The evidence on this point as discussed above cannot be treated as sufficient to prove the nature and sources of the cash credits. 13. On the basis of the above discussions the result is that in view of the law as discussed t....
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....Miss Preeti V. Mehta and Shri C.S. Amin respectively?" The facts are correctly stated in the order of the ld. Judicial Member, Therefore, it is enough even if I state the facts in a sketchy manner. 2. Skyjet Aviation Pvt. Ltd. (the assessee herein) was originally a firm of two partners, namely, Ms. Preeti V. Mehta (hereinafter referred to as "Preeti") and Shri C.S. Amin (hereinafter referred to as "Amin") having 50% share each and they began carrying on business of travel agency. On 23-4-1979, the assessee-company, which is a private limited company, was floated. Certificate of incorporation and Memorandum & Articles of Association of the assessee-company are furnished at pp. A/30 to A/46 of the paper compilation filed on behalf of the assessee. Preeti was elected as Chairman of the Board of Directors on 24-4-1979 as per the Resolution dated 24-4-1979, copy of which is furnished at page A/50. Preeti held 2 shares, whereas Amin held one share in the company. The Annual Report for April, 1982, which is provided at pp. A/66 to A/78, was signed by Ms. Parul M. Jaykrishna as well as Preeti as Directors. The balance-sheet ending with 31-3-1982 is found furnished at pp. A/71 to A/72....
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....e was a search and seizure operation conducted under section 132 of the Act in the case of the assessee during 22-3-1985 to 29-3-1985 in which books of account pertaining to the assessment years 1982-83 to 1985-86 were seized. During the seizure operation, statement of several employees and executives of the assessee were recorded including that of Miss Preeti, C.S. Amin, Hasmukh Dinmanikant, Shailesh R. Bhatt and Anil S. Gandhi. During the assessment proceedings for the assessment year 1983-84, the ITO observed that from the books of account of the company there existed loan account in the name of Miss Preeti showing a deposit of Rs. 8,81,620 made in cash on various dates. In the same way, the books of account of the company had another loan account in the name of C.S. Amin showing that on different dates different amounts were advanced during the accounting year and which totalled to Rs. 2,83,494. During the search and seizure operation, Preeti as well as Amin were examined and their statements on oath were recorded on 29-3-1985. Some of the important questions and answers given to them by Preeti are essential to be extracted hereunder thus: Q. 17. I am showing you Receipt No.....
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....nother receipt No. 2269 dated 23-11-1983 for Rs. 1,65,000 cash marked loan account with a same description as above. Please explain the source of the cash and to whom the cash belongs which is deposited in Skyjet.? A. 24. I have not deposited the cash. I don't know who has deposited the cash in my name and I don't know to whom it belongs. Q. 25. Which are the Registers of the Skyjet being maintained by you? Ans. 1. International Booking Register. 2. -do- Passenger Register 3. -do- Refund Register 4. -do- Airline Payment Register. The above registers are maintained by me. I also prepare bills in respect of International passengers. Q. 26. What ....
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....ho, at that time worked as cashier, was examined and the questions put an answers given thereunder were recorded at pp. 9, 10, 11 and 12 of paper book (Question 1 to Question 25 and their answers) are as under: Q. 1. What are you doing at present? Ans. At present I am an accounts clerk, since Dec. 1984 with M/s. Parcek Agency, Spectrum Commercial Centre, Balapur Road, Ahmedabad. Q. 2. What were you doing before 1984? Ans. Previously, I was working as accountant in Skyjet Private Ltd., Roopali Building, Lal Darwaja, Ahmedabad, since 18-5-1981. Q. 3. What is your duty in Skyjet Pvt. Ltd.? Ans. My duty in Skyjet Aviation Pvt. Ltd. to handle cash, to write bank pass book, to write petty cash book and to write collection register. Q. 4. When you are collecting cash, are you giving cash receipt at that time. Ans. Yes. Q. 5. When you have empowered duty to give receipt on cash, then what extent the power to take cash and give receipt? Ans. I remember to have received a sum up to Rs. 1,50,000 but I had the power to give receipt to receive the cash any amount. Q. 6. When you are giving cash receipt in Skyjet Aviation Ltd. at that time you are counting cash, you....
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....Gandhi. But I had prepared the receipt in the name of Lucky Laboratories as directed by Sh. Anil Gandhi. Q. 16. I show you the page of the cash book dated 24-5-1983 of Skyjet Aviation Pvt. Ltd. in which receipt No. 618, for Rs. 75,000 cash deposited in the name of P. V. Mehta and whereas in the receipt prepared by you to the same number shows 'from Lucky Laboratories' what is your explanation for the above? Ans. On seeing page of this cash book, I can say that this is not written by me. But if it seen that the original name written on cash book page was rubbed out and written Miss P.V. Mehta Loan Account "I do not know regarding these changes". Q. 17. I show you the receipt No. 2186, dated 9-11-1983 issued for Skyjet Aviation Pvt. Ltd. Can you say it is under whose handwriting and what is written in it. Ans. On seeing receipt I can say that it is my hand writing and according to that Rs. 1,00,000 cash was received from Miss Preeti V. Mehta on 9-11-1983. Q. 18. Who has given this cash to you? Ans. Shri Anil Gandhi has given this cash to me. Q. 19. Had, Miss P.V. Mehta given any cash to you at any time for deposit? Ans. No. Q. 20. Had you given any cash to ....
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....eive the cash and to whom you give cash which are recorded in the books of Skyjet? Ans. I am receiving the cash from Preetiben V. Mehta or Smt. Parulben. The instructions for writing the books of a/c. regarding loan accounts of the above persons are given by Smt. Parulben M. Jaykrishan. The same procedure is followed for payment also. Q. 4. Have you received cash personally from Smt. Parulben or have you given cash personally to Smt. Parulben? Ans. I have never received or given cash personally to Smt. Parulben. It is done through any member of the staff who is going and coming from her house. Q. 5. When such cash comes or goes to Smt. Parulben do you receive any instructions from her for the purpose of recording the same in the books of account? Ans. Yes. I receive instructions from Parulben as to in which account the transactions are to be recorded. Q. 6. Do you receive cash personally from Miss Preetiben V. Mehta or give cash personally to her in any loan account? Ans. For the last one year I have never given or received cash from Miss Preetiben V. Mehta. Before that she was also giving and receiving cash from me personally. However even that time ....
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....he said company and the same is situated at Kalon. Sometimes Lucky Lab. gives loan to Skyjet by cash and cheques. Similarly. another statement was recorded under section 132 from Shri Shailesh Bhatt, who was primarily concerned with collection of dues from parties and he was also looking after the preparation of receipts etc. in the accounts department of the company whenever any person from the accounts was on leave. The questions put and answers given to them are furnished at pp. 15 and 16 of the ITO's order dated 31-3-1986 as under: Q. 1. What work were you doing in Skyjet Aviation Pvt. Ltd. during April 1982? Ans. Mainly I was doing the work of collection of company dues and sometimes if somebody was not present in a/cs. section, I was issuing receipts. Q. 2. I am showing you receipt No. 142 dated 8-4-1982, prepared for Skyjet Aviation Pvt. Ltd. What it shows? And whose signature in it? Ans. In reply to the above question, I can say that this receipt is under my handwriting and the signature on the revenue stamp is mine, that receipt is for Rs. 75,000 and the receipt is prepared for cash received from Miss Preeti V. Mehta. Q. 3. Whether you have received Rs. 75,0....
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.... question where from she got Rs. 70,000 which she purported to have paid to Skyjet on 7-7-1982 and what was the source and where she had accounted for. In answer, she gave that there was an account in her name named "Preeti V. Mehta Loan Account", as she was niece of Smt. Parulben-her mother's sister (Mosi). Actually, this was not her money but borrowed in her name and at the same time credited and debited in her name. The same fact applied to all her transactions. Another question was asked with reference to the contents of page No. 48 which was seized as item No. A-74 which showed that she had received Rs. 20,000 cash on 11-2-1984. A question was put as to how she would explain this transaction, for which she answered as follows: "Whenever Smt. Parulben tell me to sign the voucher, I used to sign it as I have full faith in her and it used to be signed by Smt. Parulben or Chief Accountant. I did not receive any cash or credited any cash in this account. All the vouchers, which show the money receipt by me in my loan account and cash paid by me in this account was all done by Smt. Parulben M. I was not aware of the transactions which were going on in my said account (as mentione....
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.... well as withdrawals in this account, how did she give the confirmation of the accounts when she knew that she had not made any deposits or withdrawals and how did she sign these accounts and give confirmations, for which she answered that she had signed at the instructions of Smt. Parulben. In question No. 9, she was asked whether she signed any receipts while withdrawing the amounts. She answered that first of all she did not make any withdrawals, and if any papers had been signed by her, it should be taken that she had signed at the instructions of Smt. Parulben. Another question was asked whether Smt. Parulben at any time informed her that money was being borrowed and account was being maintained in her name. She answered that when she was not aware of her account in Skyjet and about other accounts, the question of knowing did not arise. Question No. 25 was asked whether did she at any time pay any amount by way of interest to Shri Kiran S. Chokshi. In answer whereof, she stated that as per instructions of Smt. Parulben she had signed a cheque in the name of Shri Kiran Chokshi but she had no idea for what it was. Vide question No. 26, she was asked why did she issue a cheque to....
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....m really amazed that these had been transferred in 1984. Thus the transfer is without my knowledge and consent, the question of sale proceeds does not arise so far as I am concerned". Preeti had stated that she was not an income-tax assessee nor she was assessed to wealth-tax. She had no fixed deposits in any bank nor having any fixed deposits. She might be having 5 to 10 tolas of personal jewellery. 5. Now, it may be stated that Shri C.S. Amin, another director of the assessee-company, in whose name there was deposit found recorded in the books of the assessee-company, was examined on 7-3-1986. He admitted that he was one of the directors of the assessee-company. He had not received any sitting fees also so far from all five companies in which he was a director. Held 8 shares of Rs. 1,000 each totalling to Rs. 8,000 in Avanti Agencies (P.) Ltd. and a question was put to him whether these shares were in his possession. He answered in the negative and further stated that the shares had been arranged by Smt. Parulben and the possession of the shares was also with Smt. Parulben. Question No. 13 was put to him and answer elicited and they are as follows: "Q. 13. If it is not y....
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....hri Avinash Thakkar. However, the cash transactions of loan accounts of Miss Preeti Mehta and Shri Chandrakant S. Amin were concerned, he was handling the cash transactions. With reference to the cash transactions of loan accounts of Preeti and Amin, a question was put to him as to from whom did he receive cash or from whom he gave the cash which were recorded in the books of the assessee-company. He answered that he was receiving the cash from Smt. Parulben or Miss Preeti. The instructions for writing the books of account regarding loan accounts of the above persons were given by Smt. Parulben. The same procedure was followed for payment also. He also replied that Smt. Parulben never received or given cash personally. It was done through any of the members of the staff who was going and coming from her house, and a question was asked whether he was receiving any instructions from her for the purpose of recording the same in the books of account. He answered that he had received instructions from Smt. Parulben as to in which account the transactions were to be recorded. When a question was put whether he received cash personally from Preeti, or he gave cash personally to her in any....
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....min as per Annexure 'B'. (B) In the books of Skyways- (1) Accounts in the name of Miss Preeti V. Mehta, as per Annexure 'C'. In para 7 of her affidavit, she states that the above moneys were the same as had been advanced by the said Shri Kiran Chokshi. Annexure 'A' is captioned as "Miss Preeti V. Mehta Loan Account-F.Y. 1982-83 assessment year 1983-84". Annexure 'B' is "C.S. Amin Loan Account for F.Y. 1982-83 assessment year 1983-84" in the books of M/s. Skyjet Aviation (P.) Ltd. 8. In the first of her affidavits, Smt. Parulban claimed to have arranged finances, inter alia, for the assessee-company for the assessment year 1983-84 in para 3 thereof. But, when we come to her affidavit dated 30-1-1989, her version was improved. In her affidavit, she states that she is the President of M/s. Skyjet Aviation (P.) Ltd. since last several years and she is looking after the finances of the said company and she arranged finance from various concerns. In para 2 of her affidavit, she states that regarding the sum of money borrowed for this concern during the accounting years 1982-83 and 1983-84 she managed the same mainly from M/s. Kiran Chokshi & Co. and in addition thereto she al....
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....from M/s. J. Bhaveshkumar Shroff and Mukundrai Amrutlal Shroff HUF. So far as lending is concerned, he had not taken any security from the persons to whom he had lent. For the question whether he had obtained any receipts as a token of having given loans to persons, he replied that he had obtained no receipts from any person to whom he had lent the money and he had also not given any receipt for the loan repayment. Vide Question No. 14, he was asked as to why he had not obtained receipts while giving loans and also giving receipts while taking loans, especially when he had signed hundi papers in favour of Shroff, and by doing this was he not harming his interest as the transactions done by him had no protection as far as interest was concerned. The answer given is very interesting and is as follows: "These loans which I have given to the persons as per the instruction of one Smt. Parul Mrugesh Harivallabdas and as per her verbal assurance these loans are advanced. These loan amounts were not physically given to these people but these amounts were handed over to the persons nominated by Mrs. Parul. Secondly even at the time of advancing loans I was not aware that to whose name I ....
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....rsons were acting on the clear instructions of Mrs. Parulben M. Jaykrishan and their statements made evidently clear that Mrs. Parulben was in complete control of the affairs of the company in all respects. Miss Preeti was only a salaried employee in the assessee-company and she was getting a salary of Rs. 1400 p.m. She had no other ostensible sources of income and it is proved beyond doubt that she had no capacity to raise loans to the magnitude of lakhs of rupees from outside. As such, according to the Assessing Officer, it is very clear that the funds deposited in the name of Miss Preeti did not belong to her. The assessee-company did not produce any evidence to support that the loans credited in her account were genuine and, therefore, having regard to her financial capabilities, she could not held to be the real owner of the loan account appearing in her name in which the credit disclosed was Rs. 8,81,620 during the year and it should be held to be income of the assessee-company from undisclosed sources. 11. The capacity of the loan creditor is one of the main ingredients to prove a cash credit. In this case, both the loan creditors, Preeti and Amin, denied having borrowed ....
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....f Preeti in assessee-company's accounts vis-a-vis her borrowals from M/s. K. Chokshi & Co. are provided in the table below opposite to each other for easy comparison and drawing easy inference: -------------------------------------------------------------------- Preeti's loan account in Account of Preeti in the the books of Skyjet Avia- books of Kiran S. Chokshi tion (P.) Ltd. ( See Annexure 'A' to Mrs. Parulben's affidavit) -------------------------------------------------------------------- Opening balance Opening balance 01-04-82 Rs. 1,34,507.94 01-04-82 Rs. 4,60,000 22-04-82 Rs. 13,635.00 22-04-82 Rs. 15,000 17-07-82 Rs. 50,000.00 17-07-82 Rs. 25,000 01-01-83 Rs. &n....
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....ooks of account of the assessee- company instead of Mrs. Parulben. The two affidavits filed by Mrs. Parulben are quite in accord with the bulk of other evidence on record and none of her affirmations in her affidavits comes in conflict with the other material evidence on record and, therefore, the argument that in spite of her filing affidavits she was not summoned and cross examined with reference to her affirmations in the affidavits does not destroy the case of the revenue in any case. Further, Mrs. Parulben was a director of the assessee-company from 1984 onwards and she is the chief spokes-person about the affairs of the assessee-company. Therefore, the question is whether her affidavits can be given more weight than the affidavits of the assessee itself. In my humble opinion, Mrs. Parulben represents the assessee- company. The interest of the assessee company is her interest and, therefore, her affidavits cannot be given more weight than the affidavits filed by the party to the proceedings itself which is self-serving. Even with reference to the signing of the balance sheet dated 31-3-1981, the resolution of the Board of Directors on 29-6-1981 given at page A/51 would show th....
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....amidars of Mrs. Parulben. Whatever signatures Miss Preeti and C.S. Amin subscribed they did at the dictates of Mrs. Parulben and all the staff of the assessee-company obeyed Mrs. Parulben as their real boss including Miss Preeti and C.S. Amin. Further, the proof of the transactions was also not established. 12. In Shankar Industries' case, the ingredients essential to be proved to accept the genuineness of the cash credits standing in the names of third parties are stated to be as under:- "It is necessary for the assessee to prove prima facie the transaction which results in a cash credit in his books of account. Such proof includes proof of the identity of his creditor, the capacity of such creditor to advance the money and, lastly, the genuineness of the transaction. These things must be proved prima facie by the assessee and only after the assessee has adduced evidence to establish prima facie the aforesaid, the onus shifts to the department. Where the assessee establishes only the identity of the creditor and nothing more, the cash credits can be treated as the income of the assessee from undisclosed sources." This decision was cited on behalf of the revenue. 13. In....
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....ng the department to issue fresh summons. The officer refused to issue fresh summons because, according to him, there was no purpose in issuing summons over and over again after the first summons had been returned unserved. In the circumstances, it could not be said that the assessee was denied a reasonable opportunity of adducing evidence. The officer could not be said to have acted in violation of the principles of natural justice. In the circumstances, he was entitled to draw an inference that the receipts were of an assessable nature. The Tribunal, having disbelieved the assessee's version in regard to his borrowing from V, had no evidence to accept his version in respect of his borrowings from the other two bankers which also arose in identical circumstances. The only reason given by the Tribunal was that, though they were examined by the officer, they had not been produced for cross- examination by the assessee. The finding of the Tribunal in regard to these borrowings was unsupported by any evidence. The Tribunal erred in setting aside the orders of the department." In this case also, the type of credit entries made in favour of Preeti and Amin was one and the same. Th....
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....he income of the assessee from undisclosed sources." 16. In CIT v. W.J. Walker & Co. [1979] 117 ITR 690 is again a decision of the Calcutta High Court. In that case, which relates to assessment year 1964-65, the ITO called upon the assessee to explain a cash credit of Rs. 50,000 found as a loan from a party and the assessee produced a confirmation letter from the party but the party's clerk deposed that the party had not given the loan. The officer also perused the income- tax returns of the party, and having satisfied with the creditworthiness of the party, held that the loan was not genuine. 17. Another decision cited for the revenue was Bharati P. Ltd. v. CIT [1978] 111 ITR 951 (Cal.). In that case, the confirmatory letters produced from the so-called creditors were all perused and when notices were sought to be served, they returned back unserved. In that case, the Hon'ble High Court held that mere filing of confirmatory letters did not discharge the onus that lay on the assessee and, therefore, the finding of the ITO that the loans represented the concealed income of the assessee was justified. 18. Another decision cited for the revenue was CIT v. Krishnaveni Ammal [1....
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.... 1961, it is not open to the High Court to embark upon a reappraisal of the evidence. Even the question of sufficiency of evidence cannot be gone into in a reference under section 256. The assessee was a partner in a Bombay firm. In 1963, the firm was raided by the Enforcement Directorate. During the course of the search, a typed copy of the balance sheet concerning the proprietary business of the assessee at Hong Kong, carried on in the name of K, was seized by the Enforcement Directorate. The balance sheet pertaining to the Hong Kong business of the assessee prepared on the instructions of the assessee as on March 31, 1959, disclosed a sum of 3,57,000 Hong Kong dollars credited to his capital account. Reassessment proceedings were initiated. The assessee explained that the amount of Hong Kong dollars 3,57,000 in fact represented unpaid price of goods and two loans. The Income- tax Officer passed the assessment order for the assessment year 1959- 60 by treating the sum of 3, 57,000 Hong Kong dollars, i.e., Rs. 2, 85,600 being the equivalent amount thereof, as the income of the assessee from undisclosed sources. This was confirmed by the Tribunal. On a reference: Held, that t....
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....ITR 799/[1981] 5 Taxman 73 (Punj. & Har.). In the facts of that case, while completing the assessment proceedings for assessment year 1964-65, the accounting period ending with October 17, 1963, the assessee-firm filed the return of income. In the course of assessment proceedings, the ITO noticed certain cash credits in the account books of the assessee. The total of the cash credits thus entered from six creditors was Rs. 1,26,000. Confirmatory letters were produced from the parties to prove the genuineness of the cash credits. The ITO accepted these items as genuine and computed the assessment. One of the cash creditors was one Shri Mohandas, proprietor of M/s. Mohandas Ghanshamdas, Amritsar. He gave a statement on 22-3-1968 before Shri J.S. Gill ITO, Dist. II(IX), Amritsar, to the effect that all the loans in the name of M/s. Mohandas Ghanshamdas were bogus. In his statement, it was stated that the entire hundi business done by him under the name of M/s. Mohandas Ghanshamdas since its inception up to the assessment year 1967-68, when he ceased to do the business, was completely bogus. None of the hundi loans that may appear in any party's account and claimed by him as advanced b....
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.... The finding which had been recorded was supported by a number of reasons given by the Appellate Assistant Commissioner and that order had been upheld. The genuineness of a credit is a question of fact and on the facts it could not be said that there was any convincing material on record to establish the genuineness of the cash credit". In this case also, on the date of the search, specific statement was given by Preeti as well as C.S. Amin stating that the amounts standing in their names in the books of account of the assessee were not lent by them. The cashier, the accountant and all other persons concerned with the accounts of the assessee-company appeared to be quite subservient to Mrs. Parulben rather than to either Preeti or Amin. Preeti and Amin were not persons of any considerable means. Even according to Mrs. Parulben, the amounts standing against these two persons were arranged by her. Her authority in the assessee-company's affairs was effective that she could dictate which particular amount was to be credited against whose name and this factor was admitted by Shri Chokshi. Shri Chokshi categorically stated that he would have refused to lend any amount either to Preet....
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....due course or on the nature of things, the assessee might be said to have offered a satisfactory explanation. At the same time, an assessee could not get himself rid of his burden by offering any sort of explanation which might suit him. Explanation should be reasonable, probabilising the happening of the things in the manner told or averred by the assessee. The ITO in the present case brought circumstances which fatally damaged the capacity of depositors to advance amount to assessee and, therefore, he was right in rejecting the explanation offered by the assessee. It was held that the addition under section 68 was justified. 27. In the facts of this case, the source of a source is sought to be adduced or furnished through the examination of Shri K. Chokshi. However, he is a person, though a chartered accountant, who did not maintain books of account recording even his professional income which he is obliged to do under the rules and the sections of the IT Act. Further, it is not his case that the money advanced was his own. His version was that he borrowed it from some agriculturist clients and lent it. So also, his version was that he had borrowed from moneylender after execu....